Cable One saw an uptick in customer growth and revenue in Q1 2022, driven by business acquisitions, and is seeking rapid fiber expansion with its Clearwave Fiber investment. CEO Julie Laulis thinks the latter especially puts the operator in a vital position against competitors.
Clearwave Fiber is a joint venture formed by Cable One and a handful of private equity firms in January, which aims to to deploy fiber-to-the-premises for underserved markets. Cable One invested about $440 million into Clearwave at the transaction’s close on January 1, 2022, with certain fiber assets from Hargray Communications – one of the companies acquired by Cable One last year – making up a portion of the JV.
“We’re not seeing anything out of AT&T or CenturyLink, quite honestly,” Laulis said on an earnings call, when asked how its rivals' fiber strategies compare to Cable One’s. “We have seen Frontier doing builds and they seem to be the biggest mover out of those three.”
Half of Cable One’s fiber footprint is covered by AT&T, Laulis pointed out, and the other half by CenturyLink (now Lumen Technologies). Frontier, the third operator in Cable One’s footprint, spans a significantly smaller coverage area. Frontier recently reported a gain of 20,000 broadband customers, many of them new to fiber.
CFO Stephen Cochran went on to say AT&T’s fiber activity is primarily concentrated in heavy suburban areas, where AT&T is converting residences from fiber-to-the-curb to fiber-to-the-home services. “It’s not that we’ll never see competition, but we’re going to see it in a less intrusive way than the rest of the industry does,” he explained.
That assurance stems from Cable One’s confidence in its customer base. Laulis said the operator has gained customers from various competitors over the course of the pandemic – including wireless, DSL, fiber and more.
“I think that goes into having a reliable service that is robust and takes care of the customers' needs,” she said. “We have a deep knowledge of these markets."
Part of Clearwave’s strategy, Cochran said, was to take a high-capital intensity business and put that into an entity that can quickly invest and grow in a low-margin environment, which would increase customer reach. He noted while Clearwave operations didn’t make much impact on Q1 average monthly revenue per unit (ARPU) lift, they will likely do so the following quarter.
Laulis also said on the call Cable One began late last quarter migrating customers from its 100Mbit/s broadband tier to its upgraded 200 Mbit/s tier, an initial increase of $5 per month. She said customer churn rates remain at “historically low levels” but the impact of the price bump won't be clear until Q2.
“Churn is typically driven from our video rate adjustments, and given our low video base, we’re less inclined to have that issue than other operators,” she said. Indeed, Cable One’s video base makes up just 225,000 residential PSUs and 13,000 business PSUs.
Metrics
Cable One ended the quarter with 962,000 residential data primary service units (PSUs), rising 20.4% year-over-year. Approximately 112,000 and 14,000 of those PSUs are attributed to Cable One’s gains from Hargray Communications and Cable America, respectively, which Cable One acquired last year. Business data PSUs increased from 81,000 to 95,000 in the same period. An additional 8,700 PSUs were brought on from Clearwave Fiber.
Consolidated revenue went up 25% to $426.7 million year-over-year, from $341.3 million in Q1 2021. Net income also got a healthy boost – jumping to $171.5 million from $68.6 million year-over-year.